IMF forecasts: Advice or hostile propaganda?

Time was when the high priests of economic wisdom at the International Monetary Fund (IMF) spoke, policymakers in India listened in awe, ready to take remedial policy action.

That time is gone, thanks to both gradual calibration of policymaking to global standards and superior cross-border flows of private capital that dwarf the few billion dollars that the IMF used to hold out as lender of last resort. The IMF's constant revision of earlier forecasts adds to the scepticism that must attend on the IMF's latest country report on India.

The IMF expects India to grow 4.6% in the current fiscal year, lower than India's official estimate of 4.9%. Look closer, you find that the IMF estimates growth in 2012-13 to have been 5%.

India's revised estimates put that growth figure lower at 4.5%. Growing from a smaller base, the same extent of value addition would yield a higher rate of growth. It is not clear why the IMF should persist with a pre-revised data set in its projections and prescriptions based on them, when more recent data present themselves.

Revision of the current account deficit, however, does not take time, it would appear. The Country Report pegs it at 3.3% of GDP, but the IMF's mission head in India says it could well be 2.5% of GDP, as the government claims. Since these numbers have a huge influence on finance professionals' confidence in the stability of the currency, should the IMF play footloose with its projections?

By repeating broad-brush platitudes on inflation and interest rates, the IMF makes uninformed contributions to an ongoing domestic debate on the efficacy of higher rates in bringing down the prices of fruit, vegetables, poultry and eggs — superior foods demanded by 140 million people who have risen out of poverty.